Published on February 2011
Even people with the best intentions fail to stick to a budget. In this issue we tell you why you are likely to fail in sticking to your budget, pitfalls to avoid and easy tracking methods that keep you on top of things.
You are more likely to stick to a budget if the categories you track reflect your income situation, lifestyle and spending habits. Make sure your budget reflects your goals and values. If you want to travel, budget for it; if you want to donate 10 percent to your church, then budget for tithing. Don’t surprise yourself with expenses that have not been budgeted for.
Also remember that as valuable as budgets are, not everyone needs one. Some people have mastered their finances and others have a clear idea where their money goes. You may be one of them and therefore do not need to waste time working on a budget. Here are some situations where you may not need a budget:
You have a huge surplus: Your income is far greater than your expenses and you have a large cash cushion in the bank.
You are meeting all your financial goals: You have an emergency fund, are saving for retirement, and are meeting other targets.
You have a consumer debt: You don’t carry balances on your credit cards and you don’t have a car loan; your only debt is probably a mortgage and you can afford the payments because your income is guaranteed.
You don’t worry about money: You never feel stressed about your financial situation, or fight with your partner about spending, or wonder how you are going to make ends meet.
Even though you don’t need to budget if these things are true, its still not a bad idea to track your spending; a budget can help you if your rosy financial situation takes a turn for the worse.
Sticking to a budget
There is more to budgeting than just putting numbers down on paper. Drafting your framework and setting categories is all well and good, but it doesn’t mean a lot unless you adjust your spending behaviour accordingly. Whether you stick to your budget depends on how you spend money on a daily basis. It can take time to get your spending to match your budget, so be patient. It may take you several months to get a hold of things. If you are struggling to stay on budget and track your spending, change tactics. Switch from a detailed budget to a loose one, or vice versa. And if you suffer setbacks don’t give up.
Tracking your spending
If you struggle to stick to your budget or with money generally, it may help to track your spending. It can be a tedious process, but what you learn about your spending habits makes tracking worth the effort. Without doing this, it can be hard to know how much you have really been spending, and what you have been spending it on.
Tracking your spending demystifies money and puts you in control. You will have a heightened awareness of your financial habits, which will let you make changes to improve your situation. But looking at the details, you will have a better sense of your overall spending and begin to understand how your buying habits affect other parts of your life.
Sometimes it helps to keep a daily money log to record your spending. This log can take any form – a pocket-sized memo book, computer text file, a spreadsheet, a mobile phone file, or whatever suits you. Every time you get money, write it down. Every time you spend money, for example paying bills or buying coffee or paying bus fare, write it down. Keep track of every coin that enters or leaves your pocket.
When you track your spending, it is important not to make judgments. This activity is meant to describe your money habits, not to change them. You probably do want to change them, but that is a different task for another time. So write everything down, whether you are proud of it or not.
Some transactions are easy to forget, like when you pay with cash or buy stuff online or use a credit card.